Employee and Agent Benefits

6 Months Ended

Jun. 30, 2020

Employee and Agent Benefits

Employee and Agent Benefits

8. Employee and Agent Benefits

Components of Net Periodic Benefit Cost

					Other postretirement
	Pension benefits				benefits
	For the three months ended				For the three months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(in millions)
Service cost	$	18.2	$	16.7	$	—	$	—
Interest cost		29.4		32.1		0.7		1.0
Expected return on plan assets		(39.2)		(36.4)		(9.0)		(8.3)
Amortization of prior service benefit		(4.2)		(2.0)		(0.3)		(0.3)
Recognized net actuarial loss		18.9		17.2		—		—
Net periodic benefit cost (income)	$	23.1	$	27.6	$	(8.6)	$	(7.6)

					Other postretirement
	Pension benefits				benefits
	For the six months ended				For the six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(in millions)
Service cost	$	36.3	$	33.5	$	—	$	—
Interest cost		58.7		64.9		1.4		1.9
Expected return on plan assets		(78.4)		(71.9)		(18.0)		(16.6)
Amortization of prior service benefit		(8.4)		(2.9)		(0.5)		(0.6)
Recognized net actuarial loss		37.7		34.1		—		—
Net periodic benefit cost (income)	$	45.9	$	57.7	$	(17.1)	$	(15.3)

The components of net periodic benefit cost including the service cost component are included in operating expenses on the consolidated statements of operations.

During the second quarter of 2019, we amended The Principal Pension Plan and The Principal Financial Group Nonqualified Defined Benefit Plan for Employees to end traditional benefit accruals as of December 31, 2022, and begin cash balance accruals January, 1, 2023. We remeasured the associated plan assets and pension benefit obligations as of May 31, 2019, resulting in a net actuarial loss of $59.0 million and a total plan amendment gain of $122.4 million. The net actuarial loss is composed of an increase in benefit obligation of $237.6 million resulting from the reduction in discount rate compared to December 31, 2018, partially offset by a $178.6 million asset gain. The net plan amendment gain was recorded in AOCI and will be amortized over the average future working lifetimes of the plans.

Contributions

Our funding policy for our qualified pension plan is to fund the plan annually in an amount at least equal to the minimum annual contribution required under the Employee Retirement Income Security Act (“ERISA”) and, generally, not greater than the maximum amount that can be deducted for federal income tax purposes. It is too early to determine, but we do not anticipate that we will be required to fund a minimum required contribution under ERISA. Regardless, it is possible that we may fund the qualified and nonqualified pension plans in 2020 for a combined total of up to $75.0 million. During the three and six months ended June 30, 2020, we contributed $15.7 million and $21.4 million to these plans, respectively.